It is said that during the gold rush, those who got rich were not the gold diggers, but those who sold them the picks. Mining machine manufacturers today have the role of pickaxe sellers to Bitcoin miners. They offer increasingly efficient hardware for an ultra-competitive multi-billion dollar market. An arms race with as yet unknown environmental consequences.
You need powerful graphics cards to mine bitcoins or other cryptocurrencies. These machines enable the calculations necessary for cryptocurrency mining, which is a niche but rapidly growing business. According to a study by Precedence Search, the global mining market was worth $1.92 billion in 2022. By 2032, it is expected to be worth nearly $7 billion.
More and more powerful (and more expensive) machines
There was a time when it was possible to mine dozens of bitcoins a day on an old PC. But today it is no longer worthwhile for individuals to mine bitcoins: they have to turn to specialized equipment. Indeed, the computing power required by the network is such that mining bitcoins has never been so difficult.
Now companies specialize in the production and sale of equipment tailored for this activity. These companies seem to have found the right way by offering a high-tech offer: the most efficient machines can be purchased for several thousand dollars, up to 8,000 euros. This market is considered promising by investors. Auradine, a manufacturer of ASIC (graphics cards specialized for mining, editor’s note), raised $80 million in early 2024.
Centralization that questions
To invest in this expensive equipment, most miners now opt for industrial “farms”. Instead of cattle, it is the power of mining machines that are used in hangars dedicated to bitcoin mining. This activity requires a massive flow of electricity. This is why the industry is established mainly in areas of the world where electricity is cheap.
Since the inception of Bitcoin, Satoshi Nakamoto seemed to have it all figured out. He designed the system with this increasing sophistication of processor performance in mind. In an email sent in 2010, he wrote: “As the network grows past a certain point, it will increasingly be handed over to professionals with server farms with specialized hardware.” To respond to this challenge and guarantee the sustainability of the network, the creator of Bitcoin developed a special mechanism. Every 2 weeks, the Bitcoin mining difficulty is adjusted to maintain a constant production rate: approximately one block every 10 minutes. Otherwise, today’s hardware would shorten the network’s work.
Sector drawn by halving
Every four years, Bitcoin miners have to reinvent themselves. In effect, the mining reward is halved with each halving. Each time, the machines will see that their prices are very volatile, and specialist traders speculate on this lucrative market.
During the bear market, the price of machines fell by 80%: everyone sold their equipment because the price of bitcoin was no longer enough. Only the best prepared (and usually the largest) miners survived. Buying equipment from their bankrupt competitors in the process. In the Bitcoin community, halving is often hailed as a process of competition that benefits the ecosystem, as only the “best” miners remain.
Others buy all available inventory to create shortages, suppress competition, or sell their machines at a premium. In 2023, publicly traded Riot invested $290 million to acquire 66,560 state-of-the-art machines.
A concentration that raises the question of the centralization of the Bitcoin network, which is supposed to be exactly… decentralized. Similarly, in the 19th century artisanal gold panning took place far west they are gradually replacing industrial gold mines. Except that with Bitcoin, the revolution happened in barely a decade.
Unnecessary waste of energy?
While Bitcoin was supposed to be a simple decentralized digital currency, the project took on unexpected dimensions. Mining is an increasingly important side effect, a necessary condition for powering the expanding Bitcoin network.
Is such an industry really desirable? Or is it a waste of energy given the social utility of Bitcoin? Here too, Satoshi Nakamoto predicted the growth of mining in a post that is still available on the bitcointalk forum. Despite the pollution and the energy used, the utility of Bitcoin would be obvious to him:
“ Mining gold is a waste, but this waste is far less than the utility of gold as a medium of exchange. I think the same will be true for Bitcoin. The utility of the exchanges that bitcoin enables will far exceed the cost of the electricity consumed. The absence of Bitcoin would therefore be a pure waste “.
However, this vision ignores the blind spots of this extractivism 2.0, especially the issue of manufacturing and recycling of electronic components. Because to make these machines you need metal mines which are very real. The complete opposite of what journalist Célia Izoard recommends, for whom “climate movement must become anti-extractivist”in his book “ Mining in the 21st century “.
While miners argue that bitcoin would facilitate the adoption of renewable energy, the issue of recycling obsolete machinery remains unthought of in the industry. Many developing countries welcome Bitcoin miners, where waste management standards are sometimes poorly enforced. There is very little data on this topic. And that’s what’s worrying.
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